Low Income Housing: State of the Market - PowerPoint PPT Presentation

Low Income Housing: State of the Market. Deloitte Consulting LLP. April 2013. State of the Market – June 2013. ACTIVITIES Extensive ground research, effort of more than 300 man-days, in 8 large urban centers to scan for sub-10 lakh housing

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Low Income Housing: State of the Market

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Note: 1Outstanding Loan Portfolio as of March 2012. For Muthoot, MHFC the data is as of June 2012. An approximate figure has been used for Shubham. 2As of Dec 2011. 3 Net Interest Margin as of Q3 FY12Source: Annual Reports, Management Conversations, Monitor Analysis

Developers claim that for large projects it often takes anywhere between 9-24 months for the combined land and project approvals, which has an impact on construction timelines, project IRRs and unit pricing

In addition, the cost of approvals can be as high Rs 50-100 psf in certain cases

Realizing the difficulty, we have seen certain developers build on gram panchayat land or adopt G+3 structures to by-pass the lengthy approval process

Long & Expensive Approval Process

According to developers across cities, their construction costs have increased by 15-20% on yearly basis

LIH is a ‘low-margin’ business and such high inflation has forced several developers to book loss on their LIH projects

High inflation also makes it difficult for developers to build their business plans as there is uncertainty over the eventual project cost

Rising Construction Costs

Availability of Affordable Land

Availability of well-connected affordable land still remains a concern in some cities

However, in some cities, infrastructure development has opened up new areas and developers in these cities don’t see land as their biggest problem

Despite the increase in LIH activity, the supply still remains a challenge and several fundamental barriers remain for this market to scale at rapid pace

Developers claim that for large projects it often takes anywhere between 9-24 months for the combined land and project approvals, which has an impact on construction timelines, project IRRs and unit pricing

In addition, the cost of approvals can be as high Rs 50-100 psf in certain cases

Realizing the difficulty, we have seen certain developers build on gram panchayat land or adopt G+3 structures to by-pass the lengthy approval process

Long & Expensive Approval Process

According to developers across cities, their construction costs have inflated by 15-20% on yearly basis

LIH is a ‘low-margin’ business and such high inflation has forced several developers to book loss on their LIH projects

High inflation also makes it difficult for developers to build their business plans as there is uncertainty over the eventual project cost

Rising Construction Costs

Availability of Affordable Land

Availability of well-connected affordable land still remains a concern in some cities

However, in some cities, infrastructure development has opened up new areas and developers in these cities don’t see land as their biggest problem